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Maruti Suzuki India Ltd.
Q1 beats street
Raise forecasts and PO
Q1 net profit at Rs 5.49bn was well ahead of expectations, mainly due to better
sales mix driving higher ASPs and higher financial income (capital gain Rs
500mn). EBITDA at Rs 8.1bn was 8% ahead of estimates, also due to better cost
management, resulting in margin beat. While demand and profit challenges are
expected to continue near term, we believe that increased diesel engine capacity
and new launches will drive stronger sales and sharp profit rebound later this
year. Raise our EPS forecasts by 5% each over FY12-13E, and PO to Rs 1,460.
Margins surprise, likely to hold up
EBITDA margins at 9.5% was 50bps ahead estimate, driven by (1) realization
beat of 2%, on faster shift to diesel models, (2) lower royalty rates, due to lower
exports, (3) control over SG&A overheads, and (4) limited impact of exchange
rate fluctuations. While we expect marketing expenses to increase in a slow
demand environment, and imports to become costlier due to strengthening JPY
(hedged up to H1), we expect continuing shift to diesel cars to offset this impact.
Increasing pace of localisation and stronger volumes, especially next fiscal also
allows us to retain our margin assumptions of 9.4%/10.1% over next 2 years.
We expect Maruti to recover lost ground
Maruti fared worse than industry so far mainly due to inadequate diesel engine
capacity, as market structurally moved away from petrol cars due to rising cost
differential. As we had indicated in our recent report Look beyond forgettable
quarter, we expect the company to regain recent losses thanks to (1) increase in
diesel capacity from H2 (up 50% to 300,000 units), (2) new launches, Swift
premium hatchback (Q2 FY11E), Multi-purpose vehicle (Q4 FY12E) and possible
replacement of Alto compact (FY13E). Retain domestic growth rates of 8%/21%
over FY12-13E. Capex is on schedule to raise capacity by 40% to 1.8n units.
Price objective basis & risk
Maruti Suzuki India (MUDGF)
Our PO of Rs 1,460 is based on the sum of core business at a 11.5x FY13E P/E
at Rs 1,144/sh and cash and equivalents at Rs 316/sh. At this PO, the stock
would trade at a 12.5x FY13E P/E, which is a 10% discount to its historical
average to factor increased competition and lower forecast growth trajectory.
Risks: Rising competition, which would adversely affect volume growth, and rising
commodity prices and currency fluctuations, which could hurt profitability.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India Ltd.
Q1 beats street
Raise forecasts and PO
Q1 net profit at Rs 5.49bn was well ahead of expectations, mainly due to better
sales mix driving higher ASPs and higher financial income (capital gain Rs
500mn). EBITDA at Rs 8.1bn was 8% ahead of estimates, also due to better cost
management, resulting in margin beat. While demand and profit challenges are
expected to continue near term, we believe that increased diesel engine capacity
and new launches will drive stronger sales and sharp profit rebound later this
year. Raise our EPS forecasts by 5% each over FY12-13E, and PO to Rs 1,460.
Margins surprise, likely to hold up
EBITDA margins at 9.5% was 50bps ahead estimate, driven by (1) realization
beat of 2%, on faster shift to diesel models, (2) lower royalty rates, due to lower
exports, (3) control over SG&A overheads, and (4) limited impact of exchange
rate fluctuations. While we expect marketing expenses to increase in a slow
demand environment, and imports to become costlier due to strengthening JPY
(hedged up to H1), we expect continuing shift to diesel cars to offset this impact.
Increasing pace of localisation and stronger volumes, especially next fiscal also
allows us to retain our margin assumptions of 9.4%/10.1% over next 2 years.
We expect Maruti to recover lost ground
Maruti fared worse than industry so far mainly due to inadequate diesel engine
capacity, as market structurally moved away from petrol cars due to rising cost
differential. As we had indicated in our recent report Look beyond forgettable
quarter, we expect the company to regain recent losses thanks to (1) increase in
diesel capacity from H2 (up 50% to 300,000 units), (2) new launches, Swift
premium hatchback (Q2 FY11E), Multi-purpose vehicle (Q4 FY12E) and possible
replacement of Alto compact (FY13E). Retain domestic growth rates of 8%/21%
over FY12-13E. Capex is on schedule to raise capacity by 40% to 1.8n units.
Price objective basis & risk
Maruti Suzuki India (MUDGF)
Our PO of Rs 1,460 is based on the sum of core business at a 11.5x FY13E P/E
at Rs 1,144/sh and cash and equivalents at Rs 316/sh. At this PO, the stock
would trade at a 12.5x FY13E P/E, which is a 10% discount to its historical
average to factor increased competition and lower forecast growth trajectory.
Risks: Rising competition, which would adversely affect volume growth, and rising
commodity prices and currency fluctuations, which could hurt profitability.
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